Working Paper: NBER ID: w3834
Authors: Fumio Hayashi; Joseph Altonji; Laurence Kotlikoff
Abstract: We consider four models of consumption that differ with respect to efficient risk-sharing and altruism. They range from complete markets with altruism to family risk-sharing. We use a matched sample of parents and independent children available from the Panel Study of Income Dynamics to discriminate between the four models. Our testing procedure is designed to deal with the set of observed independent children being endogenously selected. The combined hypothesis of complete markets and altruism can be decisively rejected, while we fail to reject altruism and hence family risk-sharing for a subset of families.
Keywords: Risk Sharing; Altruism; Consumption Models
JEL Codes: D12; D91; E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| complete markets + altruism (D64) | observed consumption patterns (D12) |
| altruism (D64) | consumption within families (D19) |
| family risksharing (model d) (D14) | consumption decisions (D12) |
| market completeness (G10) | consumption patterns (D10) |